Investors interested in stocks from the Medical - Drugs sector have probably already heard of Sandoz Group AG Sponsored ADR (SDZNY) and Zoetis (ZTS). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Right now, Sandoz Group AG Sponsored ADR is sporting a Zacks Rank of #2 (Buy), while Zoetis has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that SDZNY likely has seen a stronger improvement to its earnings outlook than ZTS has recently. However, value investors will care about much more than just this.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
SDZNY currently has a forward P/E ratio of 13.86, while ZTS has a forward P/E of 26.29. We also note that SDZNY has a PEG ratio of 0.59. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. ZTS currently has a PEG ratio of 2.58.
Another notable valuation metric for SDZNY is its P/B ratio of 2.29. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, ZTS has a P/B of 14.50.
These are just a few of the metrics contributing to SDZNY's Value grade of A and ZTS's Value grade of C.
SDZNY is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that SDZNY is likely the superior value option right now.
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